The Securities and Exchange Commission ("Commission") announced that on Friday, February 1, 2002, it filed an emergency action to halt an Internet "pump and dump" manipulation of New Energy Corp. stock ("New Energy"). Previously, on January 18, 2002, the Commission temporarily suspended trading in New Energy securities (OTC BB: NECO) because of questions concerning the adequacy and accuracy of publicly disseminated information. Late Friday afternoon, the Honorable Margaret M. Morrow, United States District Judge for the Central District of California, issued a temporary restraining order halting the manipulative scheme.

Named in the emergency action are: New Energy, a San Diego startup company that markets solar generators; Marcelino Colt ("Colt"), a Panamanian citizen residing in Panama and Mexico, who claims to be an investment banker; Geneva Financial Ltd. ("Geneva"), a Nevis corporation which purports to be an international investment banker; Magnum Financial, LLC, dba Stratos Research LLC ("Magnum"), a California limited liability company that provides public and investor relations services; Michael S. Manahan ("Manahan"), age 46, of Harbor City, California, who is Magnum's president; and Tor Ewald ("Ewald"), age 36, of La Jolla, California, who is New Energy's Secretary, Treasurer, and largest shareholder.

The Commission's complaint alleges that Colt orchestrated an Internet scheme, including the hiring of an investor relations firm to post a false and misleading buy recommendation, the distribution of mass e-mails or spam containing fraudulent statements, and posting a false and misleading press release onto New Energy's website. The scheme artificially inflated New Energy's stock price 122%, from $4.75 on December 19, 2001 to a high of $10 per share on January 9, 2002, and continuing until January 18, 2002, when the Commission suspended trading. During the "pump," Colt, Geneva and other members of the scheme sold their New Energy shares into the rising market.

The False Research Report. At Colt's urging, as the complaint further alleges, New Energy hired Manahan and his investor relations firm, Magnum, to post a purported stock analyst's research report onto the Internet about New Energy under the name of Magnum's research arm, Stratos Research LLC ("Stratos"). The Commission further alleges that Magnum merely copied a research report that Colt supplied to it, without doing any actual analysis or investigation. Magnum's research report touts New Energy in glowing terms stating: "This is one of the highest recommended BUYS ever published." (Emphasis in the original) The research report makes at least five false and misleading statements, including false and misleading claims regarding a relationship with the Los Angeles Department of Water and Power ("DWP"), negotiations with Coca-Cola bottlers in Mexico for thermal generators, and false claims that New Energy's partner had a "virtual lock" on the world market for high concentration ("HCPV") solar cells (emphasis in the original).

The False Press Release. The Commission further alleges that, on January 3, 2002, New Energy issued a press release containing false and misleading statements about a contract between New Energy and an agricultural packaging concern. The release, which was posted onto New Energy's website, falsely claims that the contract was for 10 years with a potential to supply up to 100 megawatts of power. In fact, the Commission alleges, the contract is only for five years, with the potential for only 10 megawatts of power. The Commission further alleges that the press release contains a made-up quote purportedly from the agricultural packaging concern's president.

Post Trading Suspension Press Releases. The complaint alleges that Ewald failed to take any action to correct the false statements in the research report and press release. The Commission further alleges that on January 31, 2002, the defendants posted two additional press releases onto the Internet which perpetuated the fraudulent scheme. The first press release, listing New Energy as the source, claims to correct the January 3 press release but fails to correct the key false and misleading claims about the contract, namely its duration and the actual planned needs of the customer, and fails to acknowledge that the January 3 press release contains a made-up quote from New Energy's purported customer. The second press release, listing Stratos as the source, states that the research report has been withdrawn temporarily pending review and that the report "may" contain errors, even though, as the Commission alleges, the defendants previously admitted to the false statements.

On Friday, the Court: (1) granted the Commission's application for a temporary restraining order; (2) froze the assets of several of the defendants; (3) prohibited the destruction of documents by the defendants; (4) ordered accountings from several of the defendants; and (5) granted expedited discovery. A hearing on whether a preliminary injunction should be issued against the defendants is scheduled for February 11, 2002.

The Commission obtained an order temporarily restraining the defendants from committing securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The order also temporarily restrains Geneva and Colt from violations of Section 17(a) of the Securities Act of 1933. In addition to the interim relief granted Friday, the Commission seeks a final judgment against the defendants enjoining them from future violations of the foregoing antifraud provisions, and ordering Geneva and Colt to disgorge all ill-gotten gains, and assessing civil penalties against them.

The Commission also sought and obtained an order temporarily freezing the assets of relief defendants Hector Campa ("Campa"), of San Ysidro, California; Burke T. Maxfield ("Maxfield"), age 52, of Kaysville, Utah; York Chandler ("Chandler"), of Salt Lake City, Utah; Barclay Davis ("Barclay"), age 54, of Las Vegas, Nevada; and his wife, Loretta Davis ("Loretta"), age 58, also of Las Vegas, Nevada, who together received more than $440,000 in cash and New Energy stock from Geneva and Colt during the scheme. The Commission also seeks a final judgment against Campa, Maxfield, Chandler, Barclay and Loretta, ordering them to disgorge all ill-gotten gains. The Commission does not allege that these relief defendants violated the securities laws, but rather that they received proceeds from the fraud.

The Commission acknowledges the assistance of the National Association of Securities Dealers in this investigation.